The Pound Canadian Dollar (GBP/CAD) exchange rate traded erratically through last week as elevated rate hike bets from the Bank of England (BoE) were offset by mixed economic data.
What’s Been Happening: GBP/CAD Exchange Rate Wavers on Mixed UK Data
The Pound (GBP) opened the week on the back foot as factory demand continues to wane. Final manufacturing PMI data for April revealed that the sector firmly remains in contraction territory.
However, the service sector recorded its strongest growth in over a year, buoying the Pound. Stronger consumer spending saw a boost in business activity amid growing optimism going forward.
At the end of the week, Sterling dipped amid a lack of economic data, but elevated rate hike expectations from the BoE limited any further losses.
Meanwhile, the Canadian Dollar (CAD) started the week under pressure as WTI crude continued its slide. The commodity-linked ‘Loonie’ lost significant demand as oil prices fell sharply. Global demand weakened, sending black gold to its lowest level since March at $68 a barrel.
At the end of the week the ‘Loonie’ saw a welcome boost as oil prices stabilised and a stronger-than-expected trade surplus cheered investors. A hawkish Bank of Canada (BoC) also lent support as policymakers commented that if inflation stays above 2%, further hikes will be needed.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
Another 25bps rate hike could see the Pound climb, especially if forward guidance remains hawkish.
- UK GDP Growth Rate
A mild expansion in first quarter GDP could cheer investors, although a potential stalling of growth would likely pull Sterling lower.
- Oil Prices
Fluctuating oil prices could keep a lid on the ‘Loonie’ as WTI crude continues to struggle in breaching $75 a barrel.
Pound Canadian Dollar Forecast
Elsewhere, the positive correlation that the ‘Loonie’ shares with the US Dollar (USD) could see the former slide amid policy divergence between the Federal Reserve and other major central banks. With the Fed expected to pause their tightening cycle, the ‘Greenback’ could slide, taking the Canadian Dollar with it.